Friday, July 22, 2011

Despite only being 64 years old, and constantly in a state of political turmoil, Israel is fast becoming known in technology circles, as the world’s second Silicon Valley and as a ‘start up nation’ – now also the title of a successful book by Dan Senor and Saul Singer, charting the country’s successful and often unknown tech story.

This prowess in technology has resulted in leaders and high profile figures from around the world to make regular visits to the small embattled state to see the start up nation in action. Earlier this month for instance, the Lord Mayor of the City of London, Alderman Michael Bear,flew into Israel in order to promote the UK’s capitalas the best place for Israeli’s to list their companies and to find out about opportunities for UK based fund managers to invest in Israeli technology businesses.

Seeing the start up nation in action, so soon after returning from Palo Alto – the home of the original Silicon Valley, I was impressed by the same high levels of innovation, concentrated into one small area and a similar set of cash rich and investment-hungry venture capital firms waiting on the sidelines for the next golden egg.

Company after company presented to us, a small band of international journalists, many showing a different solution to a problem people often don’t yet know they need solving.

Stand out technology companies included: Waze – a mobile navigation app updated in real-time,Playcast – an on demand gaming service delivered via TVs without a games console, and JustAd TV, an advertising service which allows adverts to be dropped into time-shifted viewing.

However, where the Israeli ‘Silicon Valley’ differs to the original Californian version, is in the amount of consumer technology products being created.

I saw a lot of middleware and chip companies while on my tech tour, which definitely all fell into the business to business category.

According to Yonatan Sela, vice president of marketing of Tvinci, a pay TV on-demand platform, because of Israel’s small size, (7.7 million) and it’s rather unique inability to do business with its direct neighbours for political reasons, it’s difficult to grow a consumer technology business in Israel.

“Building a consumer brand is much harder to do outside of a big market like the US. It’s definitely very difficult to do in Israel as the population is so small that growing and scaling a consumer brand is tough. Plus we can’t rely upon the brand then to catch on with our immediate neighbours. This is why business to business solutions we can provide via technology and then sell aboard, is more commonplace."

However, Gilad Japhet, the founder and chief executive of MyHeritage, a popular social networking site for families and is a rare example of an Israeli consumer web company, thinks the focus on technology solutions for businesses is indicative of the country’s culture and expertise.

“Israelis are incredibly good at problem solving. They are trained to never accept barriers and always try and solve an issue – no matter how difficult it is. This makes Israel very strong in technology. However, Israelis are typically not good when it comes to finesse and creating slick user interfaces for the normal consumer. This leaves a shortage of business to consumer start ups in Israel as people here usually like to solve digital issues for businesses but not the consumer…I think Israelis are drawn more to algorithms and the back end stuff.”

There is also a trend happening across the country's technology start ups which is helping to create a more stable and dependable business sector. Entrepreneurs are slowly moving away from the ‘fast exit’ which Israeli founders of technology companies had become known for. Increasingly these technology businesses are being built for the long term, hoping to ape and eventually rival the giants of Silicon Valley.

The famous Guggenheim Museum in New York has a blog that says it "tells the Guggenheim’s evolving story, and offers insights on vis...

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